Short course on Measuring and Covering Catastrophic Risks at the Maresias Conference in Sao Paulo, April 2009. Slides are now online.

There has been recently a large interest in catastrophic risks, especially following hurricane seasons in 2004 and 2005. But measuring those risks and providing an appropriate cover might be difficult. In this course, we will first describe those risks, especially climate risks (or climate related), man based risks (large fires or business interuption), and mortality risks. For those risks, we will also discuss possible covers, from classical (re)insurance to securitization (cat or mortality bonds) or insurance-linked securities (cat options). As we will see, the pricing of those products can simply be related to the choice of a risk measure. We will then discuss risk measures for large risks, and conclude with the aggregation issue.

while a Cat Bond mechanism is the following

Two examples of natural catastrophes securitization will be studied carefully

• WinCat : Winterthur securitization in 1997

see e.g. www.casact.org/library/astin/vol29no1/101.pdf or http://www.mngt.waikato.ac.nz/

• The Mexican Earthquake 2007 Cat Cond.

The dataset used in this example was kindly provided by Dr. Miguel A. Santoyo (here)

• Longevity and Mortality Risk